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Mar 06, 2023

Property Transfer LRBA

in SMSF Technical Forum

Hi,

I have a case here where there was a Bare Trust agreement with a coprorate trustee and the loan was paid out, what they did was make the Bare Trust corporate trustee be the SMSF trustee so as to claim the property is now held by the SMSF.

I have referred them back the lawyers who did the Bare Trust agreement but I am not sure this will fly as the agreement specifically talks about you need to put in place a replacement trustee to tranfer the property across. I wrote the client noting the follwoing:

Per 5.55 of the bare trust agreement, it states ‘The removal of the Security Trustee will only be effective on the appointment of a replacement trustee’

i. It further says even retiring as a Security Trustee will only be effective on the appointment of a replacement trustee by the borrower/SMSF.

ii. I think this is an issue as no replacement occurred of the original bare trust Security Trustee.

Has anyone had a similar event and what would general thoughts be? Then if it is effectively not transferred we have the SMSF trustee and Bare Trust trustee as being one and the same so what issues arise?

2 answers0 replies

Comments (2)

THE AUDITORS INSTITUTE

Mar 07, 2023

Hi CV

I have not come across this before.

The SMSF trustee / trustees normally do not have to transfer the property from the bare trustee to the SMSF trustee after the loan has been repaid.

In your example the bare trustee has become the SMSF trustee.

Do any other forum members have a view on this query?

I agree with your approach to get the client to go back to the lawyers who prepared the bare trust agreement to check if what has been done is acceptable.

Thanks

SMSF AAA

Mar 07, 2023

Replying to

Ta, speaking to a colleague they thought it may be ok on the basis the trustee is acting in different capacities but it would need to be well documented.